Cash-strapped Egypt has frozen talks to import liquefied natural gas from wealthy Qatar due to the political instability and violence that erupted after the army swept the streets of the supporters of ousted President Mohammed Morsi last week, a leading official said Monday.

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By SUMMER SAID

Cash-strapped Egypt has frozen talks to import liquefied
natural gas from wealthy Qatar due to the political instability
and violence that erupted after the army swept the streets of
the supporters of ousted President Mohammed Morsi last week, an
official said Monday.

"We were planning to resume the talks very soon but as you
can see the situation in Egypt is very difficult," Taher Abdel
Reheem, chairman of the state-run Egyptian Natural Gas Holding
Co., or EGAS, told The Wall Street Journal.

"The talks are frozen with Qatar and we are not in a
position to initiate talks with any other country," he said
without specifying when the discussion with the Persian Gulf
emirate will be resumed.

Gas-rich Qatar already promised Egypt in June five free
shipments of LNG, equivalent to 16 billion cubic feet, to
compensate the foreign partners that have already supplied
extra domestically produced gas to the North African country to
avoid wider power cuts during the summer months.

The gift initially gave Egyptian officials more time to
negotiate the terms of a deal agreed in principle in April to
secure around 13 LNG cargoes to the overseas customers of two
companies currently exporting gas from Egypt -- BG Group and
Malaysia's Petronas.

Those companies would in turn supply an extra 500 million cubic
feet/day of domestically produced natural gas, which would
otherwise have been exported, to Egypt's government.

The first cargo from the April gas-swap deal was scheduled
to be shipped in May, but a disagreement over the price Egypt
would pay for the gas held up the agreement.

"The free cargos came at that time as a discount on the
bigger deal, and we had hoped that we could still convince
Qatar to give us good prices and easy credit terms but we did
not manage to resume the talks on that subject, especially when
Morsi was ousted a month later," Mr. Abdel Reheem said.

Oil and gas producers in Egypt have curbed local production
due to political unrest, but demand for energy has continued to
grow, resulting in rolling blackouts throughout the country
that have deepened public discontent.

In response the Egyptian government last year started
looking for deals to buy LNG and issued a tender to build an
import terminal that would start to operate in May this year.
However, those plans were cancelled, due to political and
technical issues.

An Egyptian official familiar with the matter who asked not
to be named said that the Egyptian government decided to give
up on the Qatari LNG deal because the Gulf state supported the
Morsi administration.

"We felt that Qatar won't be as easy as it was during the
reign of Morsi and the coverage of their channel al Jazeera for
instance is still very biased towards the Muslim Brotherhood,"
the official said.

Qatari officials were not immediately available for comment.
The Gulf state's foreign minister told reporters in Paris
Sunday that his country had never given aid to Egypt's Muslim
Brotherhood and that all support went to Egypt as a whole and
"still continues till date."

Egypt has faced a natural gas and diesel shortage since last
year, which has pushed up food costs, seen long lines at
filling stations and electricity blackouts. The energy-supply
problems have deepened popular discontent with Egypt's former
ruling Islamist government and exacerbated broader economic
difficulties there.

The country is also struggling to complete oil-supply
agreements with Iraq and Libya aimed at easing diesel
shortages. It has been unable to provide acceptable bank
guarantees that would facilitate the flow of oil, people
familiar with the talks have previously said.

Dow Jones Newswires

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